Is There Now An Opportunity In Superior Group of Companies, Inc. (NASDAQ:SGC)?
Superior Group of Companies, Inc. (NASDAQ:SGC), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGM. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on Superior Group of Companies’s outlook and valuation to see if the opportunity still exists.
Check out our latest analysis for Superior Group of Companies
Is Superior Group of Companies still cheap?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 11.57x is currently trading slightly above its industry peers’ ratio of 9.6x, which means if you buy Superior Group of Companies today, you’d be paying a relatively sensible price for it. And if you believe Superior Group of Companies should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Furthermore, Superior Group of Companies’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
What does the future of Superior Group of Companies look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 28% over the next year, the near-term future seems bright for Superior Group of Companies. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? SGC’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at SGC? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you’ve been keeping an eye on SGC, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for SGC, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you'd like to know more about Superior Group of Companies as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 5 warning signs for Superior Group of Companies (of which 1 is a bit concerning!) you should know about.
If you are no longer interested in Superior Group of Companies, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
